COBRA, is it right for your situation?

The word COBRA is often used to describe the method of how you get to keep your former employers healths plan after you lose your job or leave employment due to a qualifying event. As discussed in our previous articles, qualifying events encompass a large range of transactions that include, termination, reduction in hours or layoffs to name a few.

COBRA, however, is a wide ranging and complex set of rules that govern many things in your financial life. For this discussion, we will focus on the action of continuing Major Medical coverage when you leave an employer.

The first thing you must always keep in the forefront of your mind is that employers really do not want to offer COBRA continuation coverage. Providing COBRA coverage serves no real business purpose and creates an ongoing liability for the employer. Because of that simple fact alone, believe that if the employer could drop you from your COBRA coverage, they will do it in a heartbeat.

That’s why most employers of any size will hire a third party administer to handle the COBRA plan for them. This will effectively relieve the employer of the burden of administering the plan and the fiduciary responsibility of providing for your coverage. Moreover, COBRA participants just incur claims and do not contribute to the profitability of the company because they no longer work for the company. It just stands to reason, that one of the main reasons people take COBRA coverage is because they have ongoing health issues that generally will not be covered by a new individual plan.

The most important aspect of the way COBRA administrators promote their services to employers with the following value proposition:

“When and if the COBRA participant is late in payment, sent payment to a wrong address or any other reason that can be supported by the COBRA regulation to drop the participant from the plan, we will enforce the rule that allows the employer to drop the participant”.

“The sooner the better”

If the employer continues to offer a group health plan, the employee and his/her family can retain their group health coverage for up to 18 months by paying group rates which may or may not be lower that individual coverage. The COBRA premium most assuredly will be higher than what the individual was paying while employed, but generally the cost should be comparable than that for private, individual health insurance coverage.

The plan administrator must notify affected employees of their right to elect COBRA. Here is the catch, the most people do not know about COBRA. The burden is on the employee to follow up on your right to COBRA, not the employer. In fact, a good illustration of this rule in action is that the former employer is not required to send you a bill for your monthly premium. More often than not, most people don relies they have not received a bill for the current monthly premium until it’s too late to pay. When they call the employer they are told that the plan cannot be reinstated because of a late payment. Then you’re done and this situation is more common than you would think. It is especially problematic when you have medical conditions that make you uninsurable in the state.

Here is the bottom line with COBRA. The employee and his/her family each have 60 days to elect the COBRA coverage from their eligibility date; otherwise, they lose all rights to COBRA benefits.

COBRA generally does not apply to plans sponsored by employers with fewer than 20 employees. Many States have similar requirements for insurance companies that provide coverage to small employers. The premium reduction is available for insurers covered by these State regulations.

In the end, your right to get a COBRA medical plan is really in your hands and determined by what you know about the rules and regulations that determine if you are eligible or not for COBRA.

Cobra Help Center is staffed with experts in this field and we can help you navigate the rule and regulations so that you will be able to get the coverage that you are entitled. Contact Us today to discuss the options available to you!